Rotterdam Square sale could prove costly to town
$8.5M sale price less than a third of assessed value
Updated 8:40 p.m.
ROTTERDAM Rotterdam Square mall was sold to a private retail company last week for $8.5 million — less than a third of the mall’s assessed value.
The deal, confirmed by new owner Mike Kohan of the Kohan Retail Investment Group, was closed last week. The sale price could have a significant impact on the mall’s assessed value of $30 million, meaning the property could be generating far less tax revenue than it has in the recent past.
Macerich Co., the mall’s former owner, paid about $1.12 million annually in taxes to various municipal entities, the bulk of which went to the town of Rotterdam, Schenectady County and the Schalmont Central School District. Though the sale won’t have an immediate impact on the property assessment, Kohan could use the price he paid for the mall — the third most valuable property in the town — in asking for a reduction in its value.
“That’s on the horizon,” town Supervisor Harry Buffardi said. “It’s looming heavily.”
The mall’s fiscal impact on town services is significant. County records show Rotterdam Square contributed $62,000 to the town’s highway fund last year, or roughly 1.7 percent of the $3.6 million raised in taxes.
The mall also pays a sizable amount of taxes to a pair of local fire districts. South Schenectady collected $24,777 in taxes from Rotterdam Square, while Schonowe received $9,830.
If the mall’s assessment dips substantially, taxing entities would consequently see a noticeable drop in revenue. And that could spell problems, especially with the school, town and county striving to stay beneath the state-imposed tax cap.
Schalmont started setting funds aside to help mitigate a drop in the mall’s value after Macerich challenged its 2012 assessment. Joe Lenz, the district’s business administrator, said the impact of the low sale price remains to be seen.
“We’ll have to see what comes of it and plan accordingly,” he said.
Buffardi has a meeting scheduled with Schalmont Superintendent Carol Pallas to discuss the tax impact of the sale. The deal was apparently at arms length, meaning Macerich sold for less than it was worth — something that could factor into future assessment challenges.
“I guess we’ll have to wait and see,” Buffardi said.
Macerich Co., a publicly traded retail management company, filed lawsuits challenging its assessment in 2012 and 2013. The Santa Monica, Calif., company argued Rotterdam Square was only worth $20 million.
“That’s seeming like a good deal now,” Buffardi said.
A spokeswoman for Macerich did not return a call for comment Tuesday.
Rotterdam Square comprises 463,987 square feet of retail space and about 70 acres of land. The sprawling structure on Campbell Road includes a food court, restaurant, movie theater, three anchor stores and more than 50 retailers.
Built in 1988, the mall’s three anchor stores are Macy’s, Kmart and Sears. Sears recently renewed its lease for five years ending in 2018. Macy’s owns its 120,000-square-foot store and the seven acres of land on which it sits.
Other major tenants include Gap, TJ Maxx, Shoe Department Encore, American Eagle Outfitters and Victoria’s Secret. The mall also has a long-term lease with Rotterdam Square Cinema, the seven-screen theater that completed $500,000 worth of renovations in 2010.
Macerich acquired Rotterdam Square eight years ago in its $2.3 billion purchase of the mall’s Rochester parent company, Wilmorite Inc. The buyout also included 11 regional malls, including Wilton Mall outside Saratoga Springs, and two open-air shopping centers.
Rotterdam Square hasn’t performed well since the sale. Though it has fluctuated in recent years, the mall’s occupancy rate has routinely been lower than others in Macerich’s portfolio. Macerich claimed Rotterdam Square had an occupancy of 86.1 percent in advertisements for the property, but filings with the U.S. Securities and Exchange Commission placed the mall’s occupancy at 79.8 percent at the end of September.
Rotterdam Square’s retail space was also valued significantly lower than other similar malls in Macerich’s portfolio. Rotterdam Square was leasing space at $234 per square foot during the third quarter of 2013 — about $66 less than the Wilton Mall 35 miles away in Saratoga County.
Rotterdam Square also has the disadvantage of having two anchors — Sears and Kmart — with a parent company that has run into financial trouble. Sears Holdings, which also owns Kmart, has posted six consecutive years of declining revenues and has recently been selling off assets.
The mall was slated for an online auction in December with a starting bid of $2 million, but the auction was called off just days before it was scheduled.